NADAC in April 2025
For the first time: Year-over-Year Generic Inflation
For those unfamiliar, our team at 46brooklyn Research have a thing for tracking prescription drug prices. Not just the prices of drugs, but perhaps more interestingly, we track the multitude of different prices of drugs. If that sounds like the same thing, it isn’t. See, perhaps the most fascinating thing about prescription drug prices – especially in the U.S. – is the fact that a single drug can yield an dizzying number of prices at any stage of of its flow through the drug distribution channel. Hell, even in just one government program, a single drug could yield thousands of different prices just at the pharmacy counter. And it’s not just the number of different prices, it’s the sheer range of prices that can stretch the human mind well beyond rational comprehension (our first report at 46brooklyn highlighted this issue with the popular leukemia medication imatinib mesylate where different state Medicaid programs were paying as low as $108.60 per pill and as high as $295.70 per pill).
As a result of this asymmetry of drug pricing realities, we spend ample time researching all the different ways that price can be effectuated. While it can be easy to get lost in all the nuances and takeaways that each benchmark can emit, the truth is that for many people, the only price that matters is the price that they have to pay. It’s hard to argue with that. But perhaps the next most interesting thing is to compare what is paid relative the underlying cost of the drug. The cost of a drug combined with any markups on the drug ultimately comprise the entirety of a prescription drug transaction. Thus, tracking both drug costs and markups are integral in the determination of what may be driving drug spending realities.
To that end, every month, we review the recent changes in brand drug list prices (manufacturer sticker prices) and generic drug acquisition costs (the prices pharmacies pay to purchase drugs).
Ever since June 2020, we have been tracking year-over-year (YoY) deflation for all generic drugs that have a NADAC price. As a reminder of what that process look like we:
Download NADAC prices for all National Drug Codes (NDCs) in the month (“n”) and the same month in the prior year (“n-1”). Eliminate all NDCs that do not have NADAC prices available in both periods and break out NDCs by whether or not they’re oral solids (i.e., tablets/ capsules) or not.
Multiply monthly NADAC unit costs by total Medicaid “units reimbursed” in the prior calendar year period. For example, to size April 2024 changes, multiply by total 2023 Medicaid units reimbursed. To size March 2023 deflation, multiply by total 2022 Medicaid units reimbursed. To size November 2017 deflation, multiply by total 2016 Medicaid units reimbursed. You get it.
Add up all cost in period n-1. Add up all cost in period n. Subtract the latter from the former. That’s the total dollar deflation. Divide total dollar deflation by n-1 cost. That’s the percent deflation.
We started doing this 5 years ago because of a Pew Charitable Trust piece on generic approvals and competition. However, it became something that we incorporated into our monthly reports as it let us gain additional insights into generic drug prices in a manner different from our single drug or month-to-month evaluations. In fact, in many other areas, monitoring YoY changes is the more common approach as opposed to month-over-month (MoM). Consider the attention that annual inflation gets. We measure inflation on an annual basis in part to avoid seasonality (e.g., heating bills look much different when a winter month is compared to spring, but less so when this December is compared to last December), but also because YoY is best for judging whether inflation is on target over the long haul, anchoring expectations, and communicating with the wider public.
We have seen, and come to expect, that when we measure generic NADAC changes YoY we will see deflation (that is declining prices relative to last year). We’ve come to expect that because it is what we’ve seen for approximately the last 5 years; that is until this past month. In April 2025 we observe for the first time YoY generic inflation - not deflation - see Figure 1:
So while YoY NADAC has historically told us that it was cheaper to buy a generic drug today than a year ago, for April 2025 it is actually telling us that it was cheaper to buy a generic drug a year ago. Given that this is the first time we’ve seen YoY generic inflation, we thought it was worth a closer look at NADAC.
April 2024 to April 2025 - What Happened?
There were a few ways we approached trying to understand Figure 1. First, was checking our work. We’ve made mistakes before and issued corrections when those happen, and so it seemed worthwhile to be sure the data supported what Figure 1 showed us. Although we always give our best efforts, we spent a good amount of time QAing this monthly report and kept getting the same answer - YoY NADAC was inflationary not deflationary. So once we were sure our observation was correct, our next step was trying to understand why.
Our first approach was to mirror what we do in our monthly reports where we compare unweighted MoM changes for NADAC, but modified it to compare unweighted YoY changes to NADAC. In Figure 2 we compare the NADAC price in April 2024 to April 2025 on an unweighted basis to see what the unweighted view show us. As can be seen in Figure 2, the unweighted view seems to be preparing us to see generic drug inflation, as on an unweighted basis a bunch more products appear to have been higher in April 2025 compared to April 2024.
As can be seen in Figure 2, much more NDCs say YoY price increases (tall red bars) relative to decreases (smaller green bars). In fact for every product that decreased in price YoY there were 2.67 products that saw a price increase. But, as we always caution that an unweighted view of pricing doesn’t tell us if the things that really matter moved up or down in meaningful ways. For example, I could launch a new generic atorvastatin, the most commonly dispensed drug, at a $1,000,000 per pill if I wanted to (let’s say it’s a list price and I’m offering a 99% discount). Undoubtedly, my launch of this product would potentially pull the unweighted average list price of atorvastatin (generic Lipitor) up quite a bit (given all the existing formulations no more expensive than $11 per pill on a list price basis in May 2025). However, if no one buys my super expensive version (and they shouldn’t), it won’t influence more meaningful measures of drug pricing, like NADAC (which reflects purchase prices by pharmacies). The point being is that while Figure 2 helps us begin to explain Figure 1, it doesn’t really tell us all that much. So, in a less abstract way, let’s compare some of the movers and shakers from our YoY NADAC price increase.
To start, we add in Medicaid 2023 utilization onto the NDCs for our April-to-April comparison. We did this because Medicaid 2023 is the last full year of Medicaid utilization data we have. When we add in Medicaid data, what begin by acknowledging the generic NADAC drugs we’re studying in Figure 1 represent 83% of all prescriptions dispensed in 2023 (650,706,132 out of a total 781,680,928 prescriptions). This makes sense as most drugs dispensed are generics and NADAC prices are available for early all generic drugs. However, we must also acknowledge that the NDCs were studying cover just 13% of 2023 Medicaid expenditures ($14 billion out of $106.4 billion). When we evaluate utilization and expenditures for the drugs on whether they increased or decreased YoY on NADAC we see that 82% of prescriptions evaluated (530,653,855 out of 650,706,132) saw a YoY NADAC increase (the remaining 18% saw a no change or a decrease) (Figure 3).
However, when we look at Medicaid expenditures, 64% of the Medicaid 2023 expenditures ($9 billion out of $14 billion) were on NDCs that saw an increase (Figure 4).
So what is going on? Well some of the biggest utilized generic drugs are really cheap and seeing relatively small numerical price increases, but on a percentage basis the small increase on an already small product can be a big increase. For example, consider simple acetaminophen tablets 325 mg. These tablets went from $2.22 per 100 count bottle on a NADAC basis in April 2024 to $2.54 in April 2025 for that same bottle. That $0.32 increase doesn’t really make the bottle more or less affordable (what’s effectively a quarter worth nowadays), but it does demonstrate a 14% price increase YoY (Figure 5).
So a small increase on an already small number can be a big percentage increase which is part of what we’re observing here. Going back to the Medicaid 2023 (see Figure 6 below), the average NADAC price per prescription (units dispensed multiplied by NADAC price) in April 2024 for products that saw an increase was $7.19. These products in April 2025 now have an average NADAC price $8.29 (or an increase of 15%; $1.10 per Rx on average). However, these are being offset by the products that are decreasing in price, which are generally more expensive generic products. For example, on the products that saw a YoY decrease in price, the average NADAC price per prescription in April 2024 was $27.39 but declined to $24.25 in April 2025 (a decrease of 11% YoY; $2.93 per Rx on average). However, as we saw in Figure 3, the increase bucket represents approximately 4.5 times more utilization than the decrease bucket. As a result, they pull prices up more than the decreases can pull down. Putting it all together (Figure 6) we can see a couple things:
Generic drugs are generally cheap (as demonstrated by an average NADAC per RX of approximately $11 or an average Medicaid payment per Rx of approximately $20 per Rx). As a result, a 3% increase in generic NADAC costs from April 2024 to April 2025 means that what previously was $10.92 now is $11.27; or $0.36 more expensive per prescription (can you break a dollar?).
Not all generic drugs are created equal. Many prescriptions have an average NADAC value below $1 per prescriptions whereas there are some that have an average NADAC value of over $1,000 per prescription. Fortunately, most generic drugs are cheap (like $10 or less on a NADAC basis), but it does mean that even small price changes (i.e., $0.01) can be proportionally large.
In general, the more expensive generic drugs are getting less expensive over time; however, the cheap ones out number the more expensive ones such that it may not be readily apparent that is happening when we look at price trends at the highest level.
While the above helps us contextualize what happened from April 2024 to April 2025 it doesn’t necessarily tell us much about why our observations were what they were or what we may expect on the horizon. In order to make better sense of what is going with YoY NADAC we’re going to take a brief side bar to discuss attempts to understand inflation over the last year.
What does the idea of a ‘tough comp’ mean?
When financial analysts talk about a “tough comp,” they are really talking about the base‐effect problem—the way an abnormally low (or high) price in the prior period can make today’s year-over-year (YoY) growth rate look exaggerated. Consider gasoline prices as an example. During the COVID-19 pandemic, gasoline prices declined (you may recall there was so much oil there was nowhere to put it, and in mid-April 2020 the price of a barrel of West Texas crude went below $0 as sellers had to pay get rid of it). Not to bring us back to those dark days, but undoubtedly a year later in April 2021 when we were looking at gas prices that were no longer free it looked like they were a lot more expensive than what a MoM view of gas prices might have shown us in April 2021. While this is not a blog about macroeconomics, such blogs do exist (for example Bancreek) which can do a much better job than we can in explaining this base-effect problem than we can. For example, in their April 2025 blog, Bancreek reminded readers that headline inflation was flattered by the fact that gasoline prices had “rolled off” a depressed base set during the prior spring’s oil-market swoon.
The point being that the same mindset the financial analysts use in monitoring economic data can be invaluable in our drug-price surveillance monitoring. Prescription-drug categories can post huge YoY or MoM swings that have little to do with fundamentals: a blockbuster loses exclusivity or a shortage pushes generics sky-high. We’ve written about what happens to drug prices when patents expire or during shortages, but haven’t really joined the individual observations into the broader concept of base-effect problems. An oversight perhaps on our part, but one that is worth correcting now given that we have no doubt there will be those that take Figure 1 in this report and create LinkedIn or X posts without context about how NADAC is broken. However, we do not think that is what Figure 1 demonstrates. Rather, we think it demonstrates a need to keep in mind that part of what we’re assessing can be influenced by unique factors a year ago that may or may not be relevant today as they were then (see earlier gasoline example). For NADAC, we think that the base-effect we need to keep in mind is that NADAC underwent a great deal of volatility starting in April 2024 - volatility that we previously discussed. It seems that some larger purchasers of generic drugs started providing data into NADAC. They appeared to have done so in a whipsaw way, coming in and out of the survey which led to several months of NADAC swinging up and down quite a bit. Ultimately, the changes in NADAC based upon who was and wasn’t participating led CMS to update NADAC methodology to ‘smooth’ observations over time. However, this does mean that when we look at YoY NADAC observations we’re looking at a period where NADAC has a ‘tough comp’ due to participation in the survey, not necessarily the survey itself.
Could NADAC be improved? Without question. Would improving NADAC, such as mandating participation in the survey, help produce additional savings on generic drugs or smooth out the NADAC observations MoM and YoY? Probably. In fact, we can probably use some other pricing benchmarks to demonstrate why this is the case.
What can other drug pricing benchmarks teach us about attempts to quantify generic drug prices?
asdfas
What even is the price of a drug?
What started out as a story about a single months NADAC observation became a conversation about WAMP and AWP. As we’ve said before, when there are a dozen different prices for a drug there is effectively no price for a drug. The mystery of US drug pricing enables those in the ‘know’ about drug prices to leverage that knowledge to make money on those less informed then themselves. After all, where there is mystery there is margin and undoubtedly there is a lot mystery when it comes to US drug pricing. We often wonder who this secrecy really benefits. If you’re a patient without insurance, you pay brand drug prices that are 60% higher on a list basis then those with insurance (at least if the Medicare first MFP drugs are a measure). At the same time, we know that list prices in the US are artificially inflated for the purposes of having enough value left to pay rebates (how could a GLP1 pay a $500 rebate if the list price was $500). However, because they’re not universally reduced the same for all payers, we get different prices amongst payers with some getting the best prices while others get the worse. HHS OIG has investigate this very phenomenon and published their results. The lack of knowledge on US drug prices mean we don’t know whose getting the brand drug for a penny (like can occur in the 340B program) and whose paying at or near full price for the drug (because discounts on ‘these’ drugs don’t exist - even though Medicaid gets a minimum 23% off AMP for each and every brand drug). It’s a crazy system where international prices may actually raise prices for some US payers. If you’re a 340B provider or a Medicaid program getting drugs at penny price or 100% above AMP respectively, you’re already getting prices in the US better than any international market - but most people don’t know or see that. Why isn’t AMP a public price benchmark if CMS has the data on hand already?
The answer is simple - we haven’t legislated one price in the US like other nations have. We haven’t prioritized access to healthcare over profits to healthcare. We haven’t put in the work to decide what we want drug pricing to actually accomplish.
XXXX.